Six weeks into Unilever's $40bn merger with McCormick & Company, cracks are widening. The deal, which combines Unilever's Foods business (excluding India) with the American sauce and spice brand, was announced with confidence from both CEOs. But shares have fallen sharply and stayed depressed, and now one of Britain's most respected fund managers has abandoned the stock entirely.
Terry Smith, who runs the £12.5 billion Fundsmith Equity Fund and held Unilever as a top-ten shareholder for more than a decade and a half, sold his entire stake. His reason: Unilever has "abandoned its promised operational focus in favour of activist-driven break-ups." Smith singled out McCormick, saying its "management and returns we do not rate highly."
The deal was reportedly pushed by activist investor Nelson Peltz, whose Trian Fund built its stake in 2022 and sits on Unilever's board. Peltz has long campaigned for structural change at the company. CEO Fernando Fernández, appointed last year with a reputation for decisiveness, brought the deal to the board without a shareholder vote. Under new UK listing rules that took effect in 2024, the board rather than shareholders had final say. Fernández argued this was standard practice post-2024. At Unilever's annual general meeting, however, several shareholders voiced concerns and criticism of the board's decision to bypass a vote.
Smith's exit signals deeper trouble. Unilever shares fell nearly 6 percent since the deal was announced. Investor concerns center on the debt being loaded onto the newly created entity, which will be listed in New York. Certain details, including the location of a secondary European listing, remain unclear.
Market doubts over Big Food breaks
Unilever's stumble reflects broader skepticism across the food sector. Kraft Heinz announced plans to split into two entities but paused the move after its largest shareholder, Berkshire Hathaway, signaled an intention to sell its stake. Mars acquired Kellanov for $36bn, and Ferrero bought WK Kellogg Co, but these were acquisitions rather than spin-offs.
Consultancy Boyden's Doug Ehrenkranz notes that while "demergers in the food space promise cleaner structures and sharper strategic focus, they also bring disruption, uncertainty and a long list of execution risks." He observes that boards measure separation success over a long period, yet tolerance for underperformance often spans only 12 to 24 months. If benefits don't materialize quickly, boards may revisit strategy or push for further change.
The operational reality of a split is far more complex than the financial mechanics. Detangling manufacturing, supply chains, IT systems and data creates months or years of uncertainty. Company culture often suffers, with employees facing prolonged ambiguity. High-performing talent tends to leave when external opportunities exist. Customers and retail partners may worry about supply continuity, commercial terms and account ownership during the transition.
Unilever stands firm, but headwinds mount
Despite the backlash, Unilever's board remains committed. A company spokesperson stated: "This transaction enables a growth-led separation of Foods at an attractive valuation, creating two stronger businesses, both positioned to win in their categories. It was a unanimous decision by the board, which firmly believes it is in the best interests of Unilever's shareholders."
Yet Smith's departure and lingering share price pressure raise a fundamental question for Unilever and other Big Food players: whether activist-driven restructuring without clear operational logic or shareholder buy-in can succeed. Markets are becoming more selective, placing greater emphasis on the industrial rationale behind deals. A successful split requires execution patience, clear post-separation strategy, and transparent communication with shareholders. For now, Unilever appears to be in a race against time and shareholder confidence.